Saturday, January 31, 2009

Marc Faber on Asian stocks: "How you play this market depends on your time frame and objectives. If you want to build some exposure in Asia, buy high-quality companies that will survive. In Singapore, that includes Fraser & Neave, United Overseas Bank and OCBC, which is run by an American, David Conner. In Hong Kong, I like Swire Pacific and Sun Hung Kai Properties. Asian banks never understood CDOs [collateralized debt obligations], so they didn’t buy a lot… In Thailand, buy Bangkok Bankand, Glow Energy, and in India, Icici Bank and Infosys Technologies. Banks in Singapore sell for 1.3 times book. In Thailand they are below book and have relatively high dividends. If all these companies drop another 50%, which I wouldn’t rule out, buy more."

If you hear of any investment advice which you think is good, please post a comment. This roundup may be updated periodically, so keep checking back.

I am not commenting on who - if anyone - I think is right and who I think is wrong, but only summarizing what some of the top advisors are saying. In addition, you should check the links to make sure that the information contained herein is accurate, and to read any price or timing recommendations (concerning when to buy, sell, or short) of the advisors.

I am not an investment advisor and this should not be taken as investment advice.

At the World Economic Forum in Davos, it was revealed that Forty Percent of the World's Wealth has been destroyed by the financial crisis so far.

As writers like Mish have repeatedly pointed out, even though the forces which could create hyperinflation (printing gzillions of dollars) are gigantic, the deflationary forces are - at present - even more enormous.

When the history of the financial crash is written, this is what will be said:

The federal reserve and its serial bubble-blowing policy, fractional reserve banking, the loss of America's manufacturing base, huge debts, spending trillions on imperial adventures in Iraq and elsewhere, and insane leverage and speculation using exotic instruments like credit default swaps were the biggest long-term causes of the crisis

The government could have prevented the crisis if it had heeded the warnings of those speaking the truth, but because it was politically easier, politicians pretended that they didn't understand what was going on, and tried to "kick the can down the road" so that it would be someone else's problem

Had the government let the markets deleverage, and let cancer of malinvestment clear itself out of the market, we would have been through most of the worst by the end of 2009. But by borrowing, printing and spending many trillions of dollars we didn't have, by artificially propping up leverage, and by taking other counter-productive actions, the government ensured a full-scale depression, and ensured that it would continue for years

Economies cannot prosper when the rule of law is destroyed and the government routinely lies. The current crash would have ended much sooner had the government been honest, and people trusted the government. The government's lies about the Iraq war, torture, spying, 9/11, and just about everything else destroyed people's trust that anything the government said was true. Even with sophisticated propaganda methods, one too many lies will destroy a government, a country and an economy. In addition, there were many Madoffs - titans of industry and finance and investment who were dishonest. Under the weight of dishonesty, no one trusts each other enough to do business, and the free market shuts down.

Top-performing fund managers are selling or paring their holdings of U.S. Treasurys, one of last year's best-performing assets....

Meanwhile, other government programs to bail out the credit markets, say by guaranteeing bank debt, will make Treasurys less attractive, managers say.

"As policy maneuvers are implemented and make the way through the system, prudent investment managers are going to be reducing their risk-free exposure and going more towards risk products," meaning anything besides Treasurys, said Steve Rodosky, manager of PIMCO Long Duration Total Return Fund....

One strategy that successful managers say has some legs is to buy debt that the government is also buying.

That strategy lends itself to holding mortgage-backed securities and debt sold by the big housing finance agencies including Fannie Mae, Ginnie Mae and the Federal Home Loan Banks....

Companies that are explicitly benefiting from policy actions are likely to have the best opportunities, said Rodosky ....

Debt sold by banks that is guaranteed by the Federal Deposit Insurance Corp. should do well, he said.

Also, debt sold by firms that have issued FDIC-backed notes but that trade on their own rating have good potential relative to the risk involved, he said.

Still, "there are going to be some losers in this process, despite the government guarantees," he said. Several institutions are likely to be consolidated.

"Not every bond out there is money good," he said.

***

Bond managers expressed the most distaste for Treasurys, which helped several avoid the market's pitfalls last year. They expect Treasury bond prices to fall, pushing yields up, by the same policies that help other assets. The government is incurring a lot of debt buying other securities and propping up financial markets, let alone the massive economic stimulus package expected to be approved in the next month or so.

Their statements are also in line with Marc Faber's comments that corporate bonds are oversold, and that not every company will fail in this economic crisis. Faber has said for a couple of months that there are very good deals to be had in buying corporate debt, if you know what you're doing.

Finally, they appear to be following Bill Gross's advice to buy early what the government is going to buy later.

Congressman Peterson is sponsoring a bill to address the Credit Default Swap problem. As Bloomberg writes:

House of Representatives Agriculture Committee Chairman Collin Peterson of Minnesota circulated an updated draft bill yesterday that would ban credit-default swap trading unless investors owned the underlying bonds. The document, distributed by e-mail by the committee staff in Washington, would also force U.S. trading in the $684 trillion over-the-counter derivatives market to be processed by a clearinghouse.

“This would basically kill the single-name CDS market,” said Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California. “Given the small size of many issuers’ bonds outstanding, this would make it practically impossible for the CDS market to exist.”

We are going from the "Panic of '08" into the "Collapse of '09", and it is unstoppable. It will be the greatest depression ever

In the middle of February or March, there will be disastrous collapses of other retail giants

There will be a collapse in commercial real estate which will dwarf the subprime problem

Wall Street has hijacked Washington

Those in the know aren't trying to save the economy. The ship is sinking, and the wealthy are just scrambling to secure their own life boats

There will be a revolt in this county, and the government is planning on ways of supressing it. For example, Arizona is training police for economic calamity and riots. The military is building detention centers, and training military for riot control. There's no stopping this

The Obama administration will take draconian measures, such as calling a bank holiday, confiscating gold, or something else dramatic which will really hurt the little people and enrich the too-big-to-fails

The only way we will get out of this economic mess is to rebuilt manufacturing base. The depression will go on and on unless we build a manufacturing base. He hopes this will be in the form of some new, very high-tech energy source - something way beyond solar or wind. [Note: I have had the same gut feeling for some time. Specifically, I have the hunch that the best way to get out of this depression is a huge energy break-through using a high-tech, clean source of energy. Physicists and engineers may be able to get us out of this mess.]

Calente recommends buying gold, and having some cash on hand and out of the bank

Tuesday, January 27, 2009

According to Jeff Rubin of Birinyi Associates, bank stocks have fallen further and faster than at any time in history, including the Great Depression.

Rubin said on Tuesday, the day of their big sell off, bank stocks were down 78.51 percent from their February, 2007 high. At a parallel point in the 1930s (two years from their high), bank stocks were down 78.09 percent.

Update: Business Week has an article entitled "Stock Decline Hits Depression Levels - Money invested 10 years ago in stocks have lost half their real value, matching the worst ten years of the Great Depression".

Merrill Lynch's chief economist for North America, David Rosenberg, writes in an economic commentary entitled "Some Inconvenient Truths" that we are probably already in a depression:

We are likely enduring a depression today

As for depressions, there is no official definition, except to say that they have existed in the past. There were no fewer than four in the nineteenth century, one in the twentieth century, and we are very likely enduring another one today.

As I have previously written, just like it took many months for the officials and talking heads to admit that we were in a recession - and in fact had been for a long time - it will take a while before the government admits that we are already in a depression.

Author James Bamford looked into the performance of the NSA in his 2008 book, The Shadow Factory, and found that it had been closely monitoring the 9/11 hijackers as they moved freely around the United States and communicated with Osama bin Laden's operations center in Yemen. The NSA had even tapped bin Laden's satellite phone, starting in 1996.

***

PBS also found that "the 9/11 Commission never looked closely into NSA's role in the broad intelligence breakdown behind the World Trade Center and Pentagon attacks. If they had, they would have understood the full extent to which the agency had major pieces of the puzzle but never put them together or disclosed their entire body of knowledge to the CIA and the FBI."

In a review of Bamford's book, former senator and 9/11 Commission member Bob Kerrey wrote, "As the 9/11 Commission later established, U.S. intelligence officials knew that al-Qaeda had held a planning meeting in Malaysia, found out the names of two recruits who had been present -- Khalid al-Mihdhar and Nawaf al-Hazmi -- and suspected that one and maybe both of them had flown to Los Angeles. Bamford reveals that the NSA had been eavesdropping for months on their calls to Yemen, yet the agency 'never made the effort' to trace where the calls originated. 'At any time, had the FBI been notified, they could have found Hazmi in a matter of seconds.'"

Former CIA analyst Michael Scheuer told PBS, "None of this information that we're speaking about this evening's in the 9/11 Commission report. They simply ignored all of it."

Not only was then-Director Michael Hayden never held accountable for the NSA's alleged failure, but he went on to oversee the Bush administration's vast expansion of domestic surveillance. In 2006, he was appointed as director of the CIA.

And since the NSA reports directly to the White House, the whole allegation that "turf wars" between the different intelligence agencies caused 9/11 holds no water. In reality, the NSA and other intelligence services conveyed sufficient information to the White House to stop 9/11, but the White House ignored it and shut down further investigation.

Preface: To those who believe that all 9/11 conspiracy claims are crazy, please listen to what intelligence officers, military leaders, legal experts, and others in the know have to say. On the other hand, to those who believe that 9/11 was an inside job - so that talk of mere "negligence" is a cop-out, please read to the end before making up your mind about strategy. As David Ray Griffin has pointed out, nearly everyone who looks at the evidence regarding 9/11 with an open mind ends up being convinced that it was an inside job. Any prosecution related to 9/11 will force people to look at the evidence.

Gangsters have been jailed for life based on convictions for tax fraud.

Investigations into small misdeeds often turn up evidence of major crimes.

And covering up the crime is itself a crime. Even if the prosecutor isn't sure how you did it, if he can prove you covered up the crime, destroyed evidence, committed perjury, etc., you'll end up in the big house.

So if government agencies are too spineless to prosecute for anything else, prosecuting those complicit in 9/11 for criminal negligence and/or cover-up is worthwhile.

Is there strong evidence of criminal negligence with regard to the 9/11 attacks?

Friday, January 23, 2009

Quite a few people think that - now that they are out of office - it is too late to try Bush, Cheney, Rumsfeld, Gonzales and the rest of the boys for their crimes.

Even those who support prosecutions think it probably won't happen. For example, Dave Lindorff wrote today:

The likelihood of their being indicted and brought to trial now that they have left office is exceedingly slim.

The truth, however, is that it is a much better time to prosecute the criminals then when they were in office.

Why?

Because, as an attorney has previously pointed out:

It is unlikely that a court would allow high-level officials such as a sitting president or vice president to be tried until they leave office after the end of their designated term or through impeachment and removal. This is because the constitutional "separation of powers" doctrine provides that one branch of government, such as the judiciary, cannot unduly interfere with the workings of another branch, such as the executive branch. It is clear that, pursuant to federal statutes, a sitting president cannot be tried criminally, although it has not been decided whether the president can be indicted (the first step in the criminal process) while in office or whether the vice president has the same protections as the president. Thus, even if a court did not dismiss a lawsuit outright on sovereign immunity grounds, it would almost certainly stay (i.e. pause) any lawsuit against the president and vice president.

Now that the boys are out of office, prosecutions can move forward. It is the perfect time to prosecute.

Because damage to portions of the brain which inhibit our brain-processing power allow us to become aware of such faculties.

Scientists at the University of Australia who have studied this issue conclude that we all probably have the ability to activate heightened brain functions without comprising normal brain functions (and we don't need to get hit in the head to do it):

So, if all of us have latent super-abilities, is it possible to activate them permanently, or at least periodically, without compromising normal brain functioning? Probably, say the Australian scientists who used transcranial magnetic stimulation to temporarily switch off the frontal temporal lobe of volunteers. Afterwards the subjects showed an immediate improvement in calendar calculating, naming the day of the week of any recent history event, and in their artistic abilities. Of course these were just the abilities tested. Scientists do not know all of the latent abilities that humans may possess.

Wednesday, January 21, 2009

Government propagandists, their hired private contractors and useful idiots are creating "downvote bots" or scripts to bury stories which question the government.

Anyone who has posted news items questioning the government's version of 9/11, the government's unquestioning support for Israel, or a host of other topics has probably noticed that all of their recent stories get downvoted virtually simultaneously, which defies the laws of probability.

One free, simple scripting program to create automatic downvotes of certain topics or news posters is called "Greasemonkey", which is commonly used on large social news sites such as Reddit.

Propaganda agents obviously aren't going to publicly brag about what they are doing, and you can bet that their use of downvote bots is much greater. Moreover, they probably have more sophisticated software than Greasemonkey.

As one example of a publicly-available downvote bot, this script automatically downvotes any stories on 9/11, Gaza, torture, Guantanamo and a host of other topics, downvotes certain posters, and engages in other forms of cyber warfare.

In November, Willem Buiter warned that the UK could follow Iceland into default:

With the pound sterling dropping like a stone against most other currencies and credit default swap rates on long-term UK sovereign debt beginning to edge up, this is a good time to revisit a suggestion I made earlier on a number of occasions (e.g. here, here and here), that there is a non-trivial risk of the UK becoming the next Iceland.

The risk of a triple crisis - a banking crisis, a currency crisis and a sovereign debt default crisis - is always there for countries that are afflicted with the inconsistent quartet identified by Anne Sibert and myself in our work on Iceland: (1) a small country with (2) a large internationally exposed banking sector, (3) a currency that is not a global reserve currency and (4) limited fiscal capacity.

The cost of buying credit protection for the sovereign debts of the UK, US, Ireland, Spain, Austria and Germany all hit fresh highs on Tuesday morning.***

The cost of buying five-year credit protection on the UK gapped wider to 133bp on Tuesday, compared to Monday’s close at 124.9bp. Ireland was out at 281bp from 275.2bp yesterday, Spain was at 156.3bp, compared to 142.5bp, Austria climbed to 157.5bp from 146bp....

Well, Spain - which was the 11th biggest CDS target on the list, 7 places better than the UK - has already been downgraded. The UK is the 4th biggest target (right behind Greece and slightly ahead of Iceland, both of which have already been downgraded).

So a downgrade of the sovereign credit rating of the UK would be logical. See also this.

Leading economist Nouriel Roubini said today that the U.S. banking system is "bankrupt" and "effectively insolvent":

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system iseffectively insolvent because it starts with a capital of $1.4 trillion.” ***

“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

Polls show that Americans overwhelmingly think the government should stop providing money to the banks.

The people are right. Stop throwing our hard-earned taxpayer money at a corpse.

Now that we have a new administration, it is the right time to find out whether the United States is still in a national state of emergency as declared on 9/11 and whether the unconstitutional continuity of government plans are still in effect.

How should we deal with the onslaught of American and Israeli government-sponsored bloggers defending those governments' actions (see this and this)?

Well, one way is to ask bloggers who appear to be parroting pro-goverment propaganda without any thought the following question:

Has the American, Israeli and/or any other government directly or indirectly instructed or requested that you write supporting any of their actions, policies or positions, or helped to organize or in any way supported you in making any writings?

This is a very helpful question.

Why?

Well, they will respond yes, assuming that they are an honest person writing in response to one of the governments' calls for pro-government blogging.

Indeed, Air Force regulations require that the blogger identify themselves as military.

So - right off the bat - some people will honestly identify themselves if you ask.

Moreover, routinely asking this question will help educate others on the Internet about the U.S. and Israeli propaganda campaigns, so that they can weigh blogs and comments in a rational manner with an educated eye.

Finally, catching a couple military bloggers in lies will help prove that they are engaging in intentional disinformation (i.e. black propaganda), and not the cheerful truth-spreading mission that the American and Israeli governments are pretending they are engaging in.

Marc Faber says: "I have shares in Asia, mining stock, exploration companies, physical gold". He thinks the dollar is a disastrous currency but the others are even worse, so he thinks the dollar could strengthen even more." Faber recommends buying Asian stocks, arguing: (1) Japan stock market is trading at the 1981 level; (2) South Korea and Taiwan are trading at 1987 levels; (3) dividends yields in Asia are 3 to 4 times higher than bond yields.

If you hear of any investment advice which you think is good, please post a comment. This roundup may be updated periodically, so keep checking back.

I am not commenting on who - if anyone - I think is right and who I think is wrong, but only summarizing what some of the top advisors are saying. In addition, you should check the links to make sure that the information contained herein is accurate, and to read any price or timing recommendations (concerning when to buy, sell, or short) of the advisors.

I am not an investment advisor and this should not be taken as investment advice.

He was a frequent contributor to academic journals and was often sought for comment on financial topics.

Armstrong supposedly called the top of the Japanese market to the day, as well as other historical market events. He is certainly very bright, and a number of people think he is a genius.

Armstrong provides exact dates for sudden shifts in the market (and political events), and claims that on March 19, 2009, the market will begin a cataclysmic crash, and will not bottom out until June 13, 2011.

No - Armstrong Is a Fake

Armstrong pleaded guilty to fraud, and "admitted to deceiving corporate investors and improperly commingling client funds in a case that prosecutors said resulted in commodities losses of more than $700 million."

Before even beginning to serve his jail time for fraud, he served a 7 year contempt sentence after failing to surrender $14.9 million in gold bars and rare coins to the government. The judge said that Armstrong failed to turn over assets that would help pay back defrauded investors (see this).

Armstrong and his attorney claim he was framed for his political views, for blowing the whistle on market manipulation and perhaps for developing a system that accurately forecasts events. In other words, Armstrong says that he is a political prisoner, like the Russian economist Kondratiev, who was jailed and then murdered for his political views.

Inconsistent Dates

In prior writings, using the same formula, Armstrong gave the date for the start of the crash as April 23, 2009. This does not appear to be an intentional adjustment in the date, rather an error in simple calculation (he used the formula 2009.3 to calculate both dates).

Such a basic error may undermine his credibility . . . or it may be the absent-minded mistake of a genius who is so focused on giant concepts that he made a basic math error.

Bottom Line

If the stock market starts to crash in earnest exactly on either March 19th (Armstrong's current forecast) or April 23rd (his prior forecast), then I will assume that Armstrong is really onto something with his timing system, and I will take it very seriously.

In that case, I will take his forecast of a June 13, 2011 market bottom as actionable intelligence. In other words, I will start buying back into the stock market soon after June 13, 2011 (assuming, of course, that the governmental systems which govern the stock markets still exist in their current form).

Friday, January 16, 2009

Famed trend forecaster Gerald Calente is warning that America's unconditional support of the brutal Israeli war on Gaza could lead to an oil embargo against the U.S. which would tip the U.S. into full-scale depression and induce panic food and fuel buying.

So if you were on the fence about whether or not the U.S. should continue to support the war against Gaza, your own economic self-interest should convince you that it is not.

Note: The U.S. will likely slide into a depression even if we stop supporting the war crimes in Gaza, but an oil embargo could accelerate the beginning of the depression.

The forecasters at Leap2020 (who have been right in many of their predictions, but wrong in large calls such as the timing of the collapse of the dollar) are predicting that 2009 will be an unfolding year of worldwide insolvency:

A new sequence of the fourth phase (so-called "decanting phase") of the unfolding global systemic crisis has began: the sequence of global insolvency.***

Contrary to what political leaders and their central bankers seem to believe worldwide, the problem of liquidity that they are striving to solve by means of historic interest rate drops and unlimited money creation, is not a cause but a consequence of the current crisis. It is in fact a problem of solvency***

The situation prevailing today throughout the entire global financial system, a large part of the world economy and all the economic players (including States) who based their growth on debt in the past years. The crisis translates and magnifies a problem of global insolvency. The world is becoming aware of the fact that it is a lot poorer than it used to believe in the last decade. And 2009 is the year when all the economic players must try to assess their real level of solvency, knowing that many assets are still losing value. Moreover a growing number of investors no longer trust the traditional instruments and indicators of measurement. Quoting agencies have lost all credibility. The US Dollar is just a fiction of international monetary unit and many countries are striving to get away from it as quickly as possible. Thus, quite rightly, the entire financial sphere is suspected of being a giant black hole. Concerning companies, no one can tell if their order books are reliable because in every sector customers cancel their orders or just stop buying, even when prices are discounted, as indicated by dropping retail sales in the past few weeks. Concerning States (and municipalities), slumping fiscal revenues are likely to result in even higher deficits and then bankruptcies. As a matter of fact, Russian billionaires, Gulf oil-monarchies, Chinese commercial Eldorados, all the « golden-egg geese » of companies and financial institutions of the planet (namely European, Japanese and North-American ones) turn out to be insolvent or hardly solvent. The question of the solvency of the US federal State and federated states (as well as of Russia or the United-Kingdom) is beginning to be asked by some big international media; as well as the question of the solvency of large capital-based pension funds, major players in this past twenty years’ globalised economy.

According to LEAP/E2020, the trend is clear: the sequence that has begun this year is a sequence of global insolvency.

Is there anything to what they are saying?

Well, probably the leading expert on monetary policy - Milton Friedman's co-author on the leading treatise on the Great Depression - agrees that the problem is not one of credit, but of solvency. She told the Wall Street Journal in October that insolvent American companies should be allowed to fail, so that the system can correct itself.

Paulson and Bernanke and Frank and the rest ignored her. Instead of letting poorly-run companies fail, and letting well-run companies pick up the pieces cheaply and then use them for valid business purposes, the fed enacted various schemes to try to stop or hide the failure of the weak and incompetent businesses.

The government has not only failed to stop "the contagion", they have ensured that it infects larger and larger companies . . . and eventually the governments which try to "fix"their problems.

Due to this faulty approach to the economic crisis, the entire world now faces an insolvency crisis.

While much of Europe is getting hammered by credit default swaps, Ireland appears to be in some of the most serious trouble. As summarized by Markit's Miles Johnson:

The cost of insuring debt issued by the Irish government leapt higher this morning as Europe’s beleaguered credit derivatives traders swallowed hard on last night’s news the Irish state had finally decided to bail out Anglo Irish bank.

Risk premiums for protecting the debt of Spain, Germany, Austria and Ireland against default also all jumped to record highs according to credit default swap data provider CMA. Credit default swaps written on Ireland widened 37bp to 257.2 . . . .

Among the companies judged less risky than the Irish state are Tesco - currently trading at 122bp or €122,000 - and Nestle, which is quoted at a 72.50bp.

Compounding its recent difficulties surrounding Anglo Irish Bank, the two-party coalition government is also grappling with a self-inflicted crisis in the public finances, and the evidence to date does not suggest that it is rising to the challenge either politically or from a policymaking perspective. . . . A fiscal surplus of 3% of GDP in 2006 is estimated to have turned around rapidly into a deficit of 6.6% of GDP in 2008, which on a comparative basis is by far the most rapid two-year decline of any euro area country since the single currency was launched.***

The Economist Intelligence Unit expects the 2009 deficit to rise to at least 10.7% of GDP, followed by 10.5% in 2010. ***

Yield spreads on Irish 10-year government bonds over benchmark German bunds are now rising sharply. At close of business on January 15th the spread had increased to 189 basis points, up from just 20 basis points at the beginning of 2008 (and up by almost 50 basis points over the past month). In the euro area, the current yield spread is second only to that of Greece, which had its sovereign credit ratings downgraded by Standard & Poor's (S&P) on January 14th. The rising risk premium on Irish government debt is already adding to the pressure on future debt-servicing costs. Given massive new bond issuance by most industrialised countries in 2009, the risk that the Irish government could face serious funding difficulties over the next few years would appear to be rising by the day.

Best of luck to The Emerald Island - I hope it can pull out of its nosedive.

Most Americans have been told by the Bush administration and the talking heads that things will get worse for a couple of months, but then the economy will start to turn around and improve in the second half of 2009 after Bushco and Obamaco's bailout and stimulus programs kick in.

In fact, the smart money is saying that the exact opposite will happen.

Specifically, Marc Faber, Robert McHugh, Societe Generale, Mish and others are saying that the stock market is now in a bear market bounce, buoyed by the hope of the general population that Obama will turn things around. But that at some point after the inauguration, people will realize that Obama's plan won't stop the crisis, and that things are going to get worse.

Thursday, January 15, 2009

Net neutrality provisions were snuck into the bill signed by Congress today releasing the last $350 billion of the Tarp bailout money.

The $350 billion will probably do about as much good as the first $350 (in other words, none), but - instead of rum and wooden arrow regulations - at least we got something useful this time in the form of net neutrality.

Lobbyists and attorneys will no doubt attempt to create loopholes in the net neutrality bill, and the fight to keep the net free is probably just beginning. But it is an important victory, nonetheless.

Wednesday, January 14, 2009

William Poole, who recently left his post as president of the St. Louis Fed, is essentially calling Bernanke a communist:

Poole said he was very concerned that the Fed could simply lend money to anyone, without constraint.

In the Soviet Union and Eastern Europe during the Cold War era, economies were inefficient because they had a soft-budget constraint. If a firm got into trouble, the banking system would give them more money, Poole said.

The current situation at the Fed seems eerily similar, he said.

"What is discipline - where are the hard choices - when does Fed say our resources are exhausted?" Poole asked.

And current head of the Philadelphia fed bank, Charles Plosser, disagrees with Bernanke's strategy of the endless printing-press and ever-increasing fed balance sheet:

Plosser urged the Fed to "proceed with caution" with the new policy. Others outside the Fed are much more strident and want plans in place immediately to reverse it. They believe an inflation storm is already in train.***

Bernanke argued that focusing on the size of the balance sheet misses the point, arguing the Fed's various asset purchase programs are not easily summarized in a single number.

But Plosser said that the growth of the Fed's balance sheet was a key metric.

"It is not appropriate to ignore quantitative metrics in this new policy environment," Plosser said.***

Plosser is bringing the spotlight right back to the Fed's balance sheet.

"The size of the balance sheet does offer a possible nominal anchor for monitoring the volume of our liquidity provisions," Plosser said.

Tuesday, January 13, 2009

And a high-level Special Ops interrogator said that torture by Americans of innocent Iraqis is the main reason that foreign fighters started fighting against American in Iraq in the first place:

I learned in Iraq that the No. 1 reason foreign fighters flocked there to fight were the abuses carried out at Abu Ghraib and Guantanamo. Our policy of torture was directly and swiftly recruiting fighters for al-Qaeda in Iraq. … It’s no exaggeration to say that at least half of our losses and casualties in that country have come at the hands of foreigners who joined the fray because of our program of detainee abuse. The number of U.S. soldiers who have died because of our torture policy will never be definitively known, but it is fair to say that it is close to the number of lives lost on Sept. 11, 2001. How anyone can say that torture keeps Americans safe is beyond me ....

Indeed, the experts are almost unanimous in their conclusion that torture makes America less safe. For example, a 30-year veteran of CIA’s operations directorate who rose to the most senior managerial ranks, says:

The old hands ... know that torture creates more terrorists and fosters more acts of terror than it could possibly neutralize.”

Of course, the experts agree that torture does not even produce reliable information or actionable intelligence, and actually prevents the chance of gaining such info. See this, this, this, and this.

A lot of them, though, are simple bootlickers desperately trying to cover up the war crimes committed by Bush, Cheney, Rummie, Gonzales and the boys. Under the theory that "the best defense is a strong offense", they figure that if they keep on repeating the lie that "we need torture to keep us safe" enough times, people will get distracted from the insanity of their heinous crimes, and the boys will be able to escape a war crimes tribunal. These types may be crazy like a fox.

Of course, there are less charitable explanations for why some people defend torture.

Today, Ben Bernanke acknowledged that the U.S. economic crisis is worse than the Japanese economic crisis of the 1990's:

Credit spreads are much wider and credit markets more dysfunctional in the United States today than was the case during the Japanese experiment with quantitative easing.

However, the Fed will still use the failed Japanese playbook:

Bernanke commented for the first time on "quantitative easing (QE)," or increasing the money supply in a manner similar to the method used by the Bank of Japan in the 1990s.

But the US central bank chief said the Fed's approach "is conceptually distinct from quantitative easing" and could be described as "credit easing."

He said that both expand the central bank's balance sheet but that the two are different.

"In a pure QE regime, the focus of policy is the quantity of bank reserves, which are liabilities of the central bank (and) the composition of loans and securities on the asset side of the central bank's balance sheet is incidental," he said.

"In contrast, the Federal Reserve's credit easing approach focuses on the mix of loans and securities that it holds ... This difference does not reflect any doctrinal disagreement with the Japanese approach, but rather the differences in financial and economic conditions between the two episodes."

In other words, he's using the Japanese approach, but changing the name.

Monday, January 12, 2009

Marc Faber: As summarized by Yves Smith, "Faber concedes an equity rally is still possible, which he thinks would lead to a reversal in gold, which he argues would make for a buying opportunity. In general he prefers the risk/reward ratio in commodities to that of stocks. He also recommends selective buying of Asian equities, with the caveat that prices could fall further in 2009"

If you hear of any investment advice which you think is good, please post a comment. This roundup may be updated periodically, so keep checking back.

I am not commenting on who - if anyone - I think is right and who I think is wrong, but only summarizing what some of the top advisors are saying. In addition, you should check the links to make sure that the information contained herein is accurate, and to read any price or timing recommendations (concerning when to buy, sell, or short) of the advisors.

I am not an investment advisor and this should not be taken as investment advice.

Economic conditions may turn out to be far worse than in previous recessions, including the Great Depression at the beginning of the 1930s. Everybody seems to think that, thanks to the government's monetary and fiscal interventions, this recession will come nowhere near the 1930s slump. However, I think it might be far worse – and precisely because of the interventions.

Supplying huge amounts of arms to one of side of a conflict means the U.S. is fighting for that side, because re-supply is an integral part of war.

And, as Phyllis Bennis notes that the U.S. is providing alot more than just ammunition:

"Israel's lethal attack ... on the Gaza Strip could not have happened without the active military support of the United States," charged Bennis, detailing the types of weapons -- such as F-16 fighter planes and Apache attack helicopters -- and the amount of military aid -- $3 billion a year -- Israel receives from Washington.

Of course, Congress has said Israel can do anything it wants, and America will support it.

The U.S. is now fighting 3 wars simultaneously: Iraq, Afghanistan and Palestine.

If you hear of any investment advice which you think is good, please post a comment. This roundup may be updated periodically, so keep checking back.

I am not commenting on who - if anyone - I think is right and who I think is wrong, but only summarizing what some of the top advisors are saying. I am not an investment advisor and this should not be taken as investment advice.

Former Counter Terrorism Czar Richard Clarke told a leading expert on internet free speech, Stanford law professor Lawrence Lessig, that there was going to be an "i-9/11", in other words, an electronic terrorist act, and an "i-Patriot Act" to crack down on freedoms on the Internet under the guise of protecting against such threats:

There’s going to be an i-9/11 event. Which doesn’t necessarily mean an Al Qaeda attack, it means an event where the instability or the insecurity of the internet becomes manifest during a malicious event which then inspires the government into a response. You’ve got to remember that after 9/11 the government drew up the Patriot Act within 20 days and it was passed.

The Patriot Act is huge and I remember someone asking a Justice Department official how did they write such a large statute so quickly, and of course the answer was that it has been sitting in the drawers of the Justice Department for the last 20 years waiting for the event where they would pull it out.

Of course, the Patriot Act is filled with all sorts of insanity about changing the way civil rights are protected, or not protected in this instance. So I was having dinner with Richard Clarke and I asked him if there is an equivalent, is there an i-Patriot Act just sitting waiting for some substantial event as an excuse to radically change the way the internet works. He said “of course there is”.

As revealed by an official Pentagon report signed by Rumsfeld called "Information Operations Roadmap":

The roadmap [contains an] acknowledgement that information put out as part of the military's psychological operations, or Psyops, is finding its way onto the computer and television screens of ordinary Americans.

"Information intended for foreign audiences, including public diplomacy and Psyops, is increasingly consumed by our domestic audience," it reads.

"Psyops messages will often be replayed by the news media for much larger audiences, including the American public," it goes on.***

"Strategy should be based on the premise that the Department [of Defense] will 'fight the net' as it would an enemy weapons system".

Indeed, the Pentagon publicly announced years ago that it was considering using "black propaganda" - in other words, knowing lies.

The Air Force is now also engaging bloggers. Indeed, an Air Force spokesman said:

"We obviously have many more concerns regarding cyberspace than a typical Social Media user," Capt. Faggard says. "I am concerned with how insurgents or potential enemies can use Social Media to their advantage. It's our role to provide a clear and accurate, completely truthful and transparent picture for any audience."

In other words, the government is targeting "social media", including popular user-ranked news sites.

In addition, when you look at what the Israeli lobby has done with Megaphone software to automatically vote stories questioning Israel down and to send pro-Israel letters to politicians and media (see this, this, this, this and this), you can start to see how the U.S. military - an even larger and better-funded organization - could substantially influence voting on social news sites with very little effort.

It is therefore not impossible that the government is hiring cheap labor to downvote stories on the social media sites which question the government, and to postpro-government comments.

Finally, under the post-9/11 "homeland security" laws, the government almost certainl routinely demands full access to ISPs and websites. In other words, we've all seen polls at Digg, Reddit, YouTube, and mainstream news sites suddenly disappear entirely if a sufficiently pro-government sentiment was not expressed.

Do you doubt that the military and homeland security apparatus would step in to take control of what it considered an "enemy" message? And remember, the government considers any message questioning anything the government does as an enemy message. See this, this, this and this.

Pelicans suffering from a mysterious malady are crashing into cars and boats, wandering along roadways and turning up dead by the hundreds across the West Coast, from southern Oregon to Baja California, Mexico, bird-rescue workers say.

Frogs and bees are so different from people that they are easier to ignore. But birds are larger, more complicated, warm-blooded animals, and thus closer to us biologically.

People will be inreal trouble unless we figure out why the amphibians, bees and birds are dying.

If you hear of any investment advice which you think is good, please post a comment. This roundup may be updated periodically, so keep checking back.

I am not commenting on who - if anyone - I think is right and who I think is wrong, but only summarizing what some of the top advisors are saying. I am not an investment advisor and this should not be taken as investment advice.

Bill Gross is managing director of the world's largest bond fund, Pimco, which manages some $790 Billion Dollars in assets. Pimco also is managing the commercial-paper assets for the Federal Reserve as part of the government's Commercial Paper Funding Facility program. As such, Pimco is in many ways an insider.

In his January 2009 Investment Outlook, Gross writes that it is not only Madoff who ran a Ponzi scheme, but the entire U.S. economy is a Ponzi-like scheme. He calls it "our Ponzi-style economy".

This may be obvious to many of us. But the fact that Gross said it is news.

Tuesday, January 6, 2009

In "Will U.S. Treasuries Be the Next Asset Bubble to Burst?", Nouriel Roubini writes:

In 2009, any signs of a less than dire economic outcome as deflation may burst the bubble in Treasuries.***

This bubble is motivated by fear rather than greed. Investors are seeking to protect themselves against deflation and declining stock markets by blindly acquiring "risk-free" government bonds [Financial Times - "FT"]

Institutional investors also contributed to the bond bubble. Pension funds, insurers and others have sold off toxic securitized triple-A rated bonds and replaced them with Treasuries. Government bonds are attractive for diversification purposes since they have held up while just about everything else in their investment portfolios has collapsed (FT)

The Federal Reserve's signals that it might buy longer U.S. government maturities added momentum to the epic rally (FT)

The median forecast of 19 primary dealers is that 10yr bond yields will rise to 3% and 2yr yields will rise to 1.2% in 2009 (Bloomberg)

Because of the low income on Treasury securities, it would take only a small rise in yields for total returns on Treasuries to turn negative (Merrill)

Given the level of extension in yields, it would not be difficult to generate losses of say 10% in the 10-year Treasury bond, and as much as 20-25% in the 30-year Treasury bond over a very short period of time [Hussman Funds - "Hussman"]

If the dollar holds steady, Treasury bond prices are likely to plunge; if Treasury prices hold steady, the value of the dollar is likely to plunge. Either way, foreign holders of Treasury securities are facing probable losses, and they know it (Hussman)

The specter of deflation and Japan's experience in the 1990s suggest bond yields could fall significantly further – 10yr JGB yields went on to find a low of 0.45% despite massive fiscal stimulus. Ironically, it was the start of quantitative easing in March 2001 when yields ticked up (JPMorgan)

While Roubini does not explicitly talk about shorting long-term treasuries, as do Marc Faber and Jim Rogers, he does appear to believe that the long-term treasury bubble will likely burst. However, this is subject to two large caveats:

(1) If the economic situation remains dire, the treasury bubble may continue for a while; and

Here's a round up of what some of the top investment advisors who predicted the financial crisis are suggesting for 2009:

PhD economist Marc Faber suggests buying gold (and gold miners), silver, platinum, and industrial commodities, massively shorting long-term treasuries at the appropriate time, and - if one wants to buy stocks - to buy some resource company stocks such as Freeport McMoran, and some Asian stocks (but selling out of stocks at the top of the bear rally).

Everyone knows that the dollar will eventually crash. The big question is when.

For two very different views on the subject, here is what billion-dollar fund manager Peter Schiff and investment advisor Mike "Mish" Shedlock say on what's in store for the dollar in 2009.

Schiff believes that - starting soon after Obama's inauguration - the dollar will experience its biggest plummet yet, as the Obama administration prepares to print off several trillion more greenbacks (money used to pay for bailouts and his "stimulus" packages). Schiff believes that this will create an unprecedented amount of inflation, which will trash the follar and cause gold prices to skyrocket.

On the other hand, Mish argues that deflation - not inflation - will rule in 2009, and says of the dollar:

Where the dollar goes will depend greatly on what foreign central banks do. Additional cuts by the ECB, BOE, and China will be dollar friendly. I expect those to happen. I am sticking with a thesis that has the dollar index in a trading range of 75-90 for most of the year. If Obama proves to be more fiscally prudent than the market participants think (this is quite possible because no prudence at all is expected), then the dollar can easily bust the top of that range. If the ECB refuses to cut in the face of an expanding recession, the dollar can fall to the bottom of that range.

It is highly unlikely the dollar crashes in 2009. The dollar already crashed. There is no other word for a plunge from 120 to 70 on the US dollar index. Furthermore, seignior currencies tend to strengthen in deflation and there is no reason to believe deflation will come to an abrupt end.***

China is a wildcard, as is war in Mideast between Israel and Iran, as is protectionist legislation coming from Congress. On the positive side, pulling troops out of Iraq is likely dollar friendly. The rationale is spending money in the US where we at least get something out of it on the asset side of the balance sheet is better than wasting money dropping bombs. And finally it is possible that Obama makes peaceful overtures towards Iran, defusing a messy situation. This too would likely be dollar friendly.

As always, one's views on inflation versus deflation are key to one's prediction on where the dollar is heading. Indeed, Schiff and Mish have been debating inflation versus deflation for approximately a year, and their debate about the dollar is just one facet of the debate.

In an article entitled "Will There Be a Recovery?", Former Assistant Secretary of the Treasury, and former editor of the Wall Street Journal editor, Paul Craig Roberts pens the best one-liner of the week:

What we are witnessing is a once great power engaging in fantasy to disguise from itself that it is a failed state.

He's referring, of course, to the U.S.

Runner-up for best zinger is Keith Olbermann's rebuttal to Cheney's statement that the administration kept us safe from further attacks after 9/11:

"Listen, you fatuous, condescending lunatic," Olbermann erupted. "Your task was not to deal with the aftermath of 9/11 -- it was to prevent 9/11."

"And if you utterly whiffed," concluded Olbermann, "on the most important test of all the presidencies in your lifetime, Mr. Cheney, you do not get credit for getting a C on the pop quizzes that followed."

Preface: Martin Luther King, Jr. suggested we judge people by the content of their character, and not by some superficial characteristic. I whole-heartedly agree.

Some Jewish people work tirelessly for the good of humanity, while others are murderers who would inflict grave harm on others. The same spectrum - by the way - is true of Arabs, of people from India, of whites in the U.S. and England, of all peoples. Humanity ranges from noble and selfless to lower than any animal - more than any other species - and this is true of all peoples.

Loving or hating someone based on their race or ethnicity makes no sense.

Why do so many Americans - especially politicians and media talking heads - believe that criticizing Israel is wrong, no matter what it does (see this and this)?

I think the main reason is that the wrong lessons have been drawn from the Holocaust . . or at least the wrong lessons are pushed on the American people.

Specifically, the lessons touted by the elites are:

(1) The Jewish people were given a homeland to protect Jews from persecution; and

(2) We must allow the Israelis to use all means necessary to protect that homeland.

Let's take a deeper look at these claims.

License to Kill

It is a common pattern among individuals and societies that the victim becomes the bully.

Does an individual bully's background of being a victim justify his later violence? No, it doesn't. The same is true of peoples and nations.

Israel has committed war crimes, false flag terror, and horrendous violence against the Palestinians and other Arab peoples. As sympathetic as I am to the persecution of the Jewish people - see below- the bullying behavior is not justified.

The "never again" lesson which most people take from the Holocaust is that Israel must do anything and everything to protect itself. But by committing war crimes, false flag terrorism, and other barbarous acts, and by violating one UN resolution after another, Israel has become just like all other ruthless oppressors throughout history. The ends do not justify the means, any more than Stalin's murder of millions of innocent Russians was justified in the name of creating some crazy communist workers' "utopia".

Why Was Israel Placed in the Middle East?

Americans are told that the state of Israel was placed in Palestine because it was the original homeland.

Certainly, the Jewish people deserve to have a safe place, where they will not be persecuted.

But a state could have been set up for them anywhere in the world. It could have been located on an island, or on the North Pole, or in the jungles of Brazil, or the Sahara desert. The allies could have bought some other area from a willing seller. Why Palestine?

Without the permission from or payment to the Palestinian people - Israel was sited on their land.

If Israel was, indeed, sited in Palestine because the Western powers believed that to be the ancestral homeland of the Jewish religion, that would actually have been the use of military might to promote a particular religion. Specifically, if America, Britain and the other Western powers that agreed to the creation of Israel sited it in Palestine because they were sympathetic to the Judeo-Christian religions and not of the Muslims who lived in Palestine, then that is religious war (and a violation of the separation of church and state in American decision-making as to foreign affairs).

But I believe there was another reason that the Western powers sited Israel in Palestine: to gain a foothold to the oil resources in the Middle East. The historical record is clear: America and England knew how important oil was, and were determined to gain access to it.

What better way than to locate an ally there and arm them to the teeth?

The Right Lessons from the Holocaust

So what are the right lessons which we should take from the holocaust?

So the first lesson we should learn is that history is very different from what the propaganda machine would have us believe. America helped the Nazis, and yet pretended we were just the "rescuers". That's not what really happened.

Second, the Nazis used false flag attacks at Gleiwitz and the Reichstag to whip their people into a state of terror and sheepish obedience. We must remember that age-old ploy, and guard against its use by our own governments. "Never again" must apply to false flag attacks.

Finally, we should remember that the agendas of entire nations are sometimes hijacked by those with ulterior motives.

For example, most Americans confuse Zionism and Judaism. But many devout Jews are against Zionism, and Zionists can be Christian as well as Jewish. Those who say that criticizing Zionism is anti-semitic are misleading people for their own ulterior motives which have nothing to do with ensuring the safety of the Jewish people. Israeli Zionists are no more true to the cultural heritage of the Jewish people than Neocons are to the conservative tradition.

Please Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to work